Bank Outsourcing Agreement

The EBA has just clarified that the specific termination and exit guidelines apply only to outsourcing contracts for „critical or important functions.“ The supervisory board explained the scope of its outsourcing guidelines following a request from Pinsent Masons, the law firm behind Out-Law. Banks and other financial and payment institutions are not required to complete a specific list of European Banking Authority (EBA) regulatory guidelines for the termination of outsourcing agreements, unless they relocate „critical and important functions,“ as confirmed by the EBA. „The EBA`s Q-A mechanism is a useful tool that financial institutions and their suppliers should keep in mind when practical enforcement issues of EBA regulatory guidelines can be interpreted. Clarification of issues related to EBA outsourcing policies can help reduce the costs and costs of negotiating outsourcing contracts,“ he said. However, the text of the guidelines does not determine whether the termination rights section applies to all outsourcing contracts concluded by financial institutions or to the outsourcing of „critical and important functions.“ The guidelines explicitly state that these termination rights should be included „at a minimum“ in contracts to outsource „critical or important functions.“ It also states that the outsourcing agreement should „facilitate the transfer of the outsourced function to another service provider or its reintegration into the payment institution or institution“ and also lists the provisions supporting this requirement that financial institutions must include in the written outsourcing contract. The guidelines contain a specific section on termination rights. This section contains the EBA`s expectation that financial institutions explicitly provide for the possibility of terminating this agreement in their outsourcing agreements and provides a number of examples of situations in which the contract should allow the right to terminate.